Bookmark
PDF
Share
CaseIQ

Bhagwad Swarup Shri ... v. Commissioner of Inc...

Income Tax Appellate Tribunal

Aug 31, 2007

Judgment

Subsequent
References

CaseIQ

Smart Summary (Beta)

Structured Summary of the Special Bench Order (per R.V. Easwar, Vice President)

Factual and Procedural Background

The assessee is a charitable institution which applied to the Commissioner of Income-tax (CIT) for registration under section 12A on 23-10-2001. By the time-limit laid down in section 12AA(2) — six months from the end of the month in which the application was received — the CIT ought to have passed an order on or before 30-4-2002. The CIT initiated certain enquiries by letter dated 3-4-2002 (within the six-month period) and the assessee responded with details; the enquiry continued beyond 30-4-2002. The CIT ultimately passed an order refusing registration on 26-5-2003, after the six-month period had expired. The assessee appealed the refusal, contending that in view of the CIT's failure to pass an order within the statutory period registration should be deemed granted. Because different Benches of the Tribunal had adopted conflicting views on the consequence of the CIT's failure to decide within six months, the matter was referred to a Special Bench with the following question (quoted in the order): "Whether in a case where the Commissioner of Income-tax does not pass the order granting or refusing registration of Trust within the period laid down in section 12AA(2) registration would be deemed to have been granted to the Trust or Institution automatically on expiry of the period specified in section 12AA(2) of the Act?"

Legal Issues Presented

Whether, where the Commissioner of Income-tax does not pass an order granting or refusing registration of a trust within the period laid down in section 12AA(2), registration is deemed to have been granted automatically on expiry of the prescribed period.
What is the legal consequence of the CIT's failure to pass an order within the six-month period — i.e., whether (as argued by the assessee) the possible consequences are: (i) deemed grant of registration; (ii) deemed refusal of registration; (iii) abatement of the application; or (iv) the application remains pending — and which of these consequences should be recognized.

Arguments of the Parties

Assessee's (Appellant's) Arguments (as presented by Dr. Gupta)

The right to obtain registration is a valuable/substantive right and is the entry point for exemption under section 11; hence timely grant of registration is material.
Section 12AA(2) uses mandatory language ("shall"); therefore the CIT is bound to either grant or refuse within six months and failure to do so renders any later order a nullity.
Because a right of appeal to the Tribunal against refusal exists (with effect from 1-6-1999), a deemed refusal would be ineffective in the absence of a written order; thus deemed refusal is not a viable consequence.
The application cannot be held to abate or to remain merely pending because the statute contains no provision so stating and such consequences would unfairly prejudice the applicant for the CIT's delay.
Therefore the only permissible consequence of non-decision within six months is that registration is deemed to have been granted.
Two specific reasons advanced for deeming grant: (a) the department is not prejudiced because the CIT may cancel deemed registration under section 12AA(3) (and that cancellation is appealable to the Tribunal); (b) the Assessing Officer can in assessment proceedings examine whether the activities are charitable and whether funds are applied appropriately, so revenue protection exists even if registration is deemed granted.
The assessee relied on authoritative commentaries (Chaturvedi & Pithisaria; Avadesh Oza) and analogous case law under other provisions (section 139 extension cases and DLF Universal Ltd.) to support the principle that non-decision within prescribed time can amount to deemed acceptance in appropriate circumstances.
Policy and interpretative arguments based on G.P. Singh (and Lord Shaw's dictum) were advanced: where alternative constructions exist, choose the one avoiding uncertainty, friction or confusion in the statutory system; holding the time-limit to be mandatory and resulting in deemed grant avoids mischief caused by administrative delay.

Department's (Respondent's) Arguments

The word "shall" in section 12AA(2) should be read as directory (or effectively "may") permitting the CIT to pass orders even after the six-month period; the time-limit is not mandatory.
The CIT had initiated enquiries within the statutory period; the enquiry continued and therefore the delay in passing the order was caused by the need to complete enquiries — no prejudice to the assessee was shown.
So long as the assessee is not prejudiced and has a right of appeal against refusal, the fact that the refusal order was passed after the period should not be a ground for invalidating it.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Sambandh Organisation v. CIT (IT Appeal No. 5582 (Delhi) of 2003) (Tribunal order)	This Tribunal bench held that if an application for registration is not decided within six months, the registration sought must be deemed to have been allowed.	The Special Bench noted this decision as one of the co-ordinate Bench views that supported the assessee's contention that non-decision within six months leads to deemed grant; it formed part of the impetus to constitute the Special Bench.
Karnataka Golf Association v. DIT(E) / Director of Income-tax [2004] 91 ITD 1 (Bangalore Bench)	The Bangalore Bench held that where the application for registration is not decided within the six-month period the registration must be deemed to have been allowed.	The Special Bench expressly agreed with the conclusion reached by the Bangalore Bench and relied on it in answering the referred question in the affirmative.
Sardari Lal Oberoi Memorial Charitable Trust v. ITO [2005] 3 SOT 229 (Delhi Bench)	Recorded a view consistent with deeming registration to be granted where no decision is made within the statutory period (as cited).	The Special Bench cited this authority among several Tribunal benches whose conclusions aligned with the view the Special Bench adopted.
People Education & Economic Development Society (PEEDS) v. ITO [2006] 100 ITD 87 (Chennai Bench)	The Chennai Bench reached a conclusion in line with treating non-decision within the time-limit as resulting in deemed grant (as cited).	Included by the Special Bench among the Tribunal decisions whose reasoning the Special Bench endorsed in reaching its conclusion.
DLF Universal Ltd. v. Appropriate Authority [2000] 243 ITR 730 (Supreme Court)	Where the appropriate authority failed to pass an order within the prescribed period under section 269UD, the Supreme Court held that the authority was duty-bound to issue a "no objection" certificate — used as an analogous instance where non-decision led to a statutory consequence beneficial to the applicant.	The Special Bench found this authority helpful and analogous, treating it as supporting the proposition that failure to act within the statutory time can carry a specific statutory consequence (and used it to draw analogy with section 12AA(2)).
Lachman Chaturbhuj Java v. R.G. Nitsure [1981] 132 ITR 631 (Bombay)	Cited as an instance under section 139 where failure to dispose of an application for extension of time and non-intimation of refusal was held to mean the extension must be deemed allowed.	Used by the Special Bench as part of a group of authorities demonstrating that in certain tax contexts non-decision has been treated as acceptance; relied upon in analogy.
Harmanjit Trust v. Commissioner Of Income-Tax, Patiala-I [1984] 148 ITR 214 (Punjab & Har.)	Cited among cases under section 139 showing that non-decision on extension applications can be treated as acceptance.	Placed by the Special Bench in the group of authorities supportive of the assessee's contention by analogy.
CIT v. Surinder Kumar Parmod Kumar [1992] 193 ITR 71 (Punjab & Har.)	Cited as part of authorities on non-decision/extension under section 139 producing a deemed grant of extension.	Included in the Special Bench's comparative discussion of analogous tax-law situations.
Commissioner Of Income-Tax v. Rohit Organics (P.) Ltd. [2006] 150 Taxman 254 (All.)	Cited in the same context of non-decision on an application for extension being treated as allowing the extension.	Referred to by the Special Bench as part of the line of analogous authorities.
Commissioner Of Income Tax, Jullundur v. Ajanta Electricals, Punjab [1995] 215 ITR 114 (SC)	Cited among authorities dealing with the consequence of non-decision in tax procedural contexts (as analogous support).	The Special Bench included this case in the set of authorities that illustrate analogous consequences elsewhere in the tax law.
Dalchand v. Municipal Corporation AIR 1983 SC 303	Establishes that whether a statutory provision is mandatory or directory depends on the purpose of the statute, object of the provision, and consequences of the construction; negligence of public authorities should not promote public mischief.	The Special Bench relied on Dalchand's principles to determine that the time-limit in section 12AA(2) is mandatory and that failure to comply should not be allowed to defeat the statute's object.
Superintendent of Taxes v. Onkarmal National Trust (cited from G.P. Singh commentary)	Cited in the text of commentary extracts: where time as to performance of public duty is related to a right conferred, the time provision will generally be treated as directory unless prejudice is shown; if the time is a condition for exercise of a statutory power it will be mandatory.	Referenced in the Special Bench's consideration of interpretative authorities and commentary cited by the assessee; employed to support the mandatory reading of section 12AA(2).
CCE v. M.M. Rubber & Co. AIR 1991 SC 2141 (cited from G.P. Singh commentary)	Referred to in commentary regarding mandatory/directory distinctions in time provisions.	Used as part of the doctrinal background cited by the Special Bench in interpreting time-bound statutory duties.

Court's Reasoning and Analysis

The Special Bench proceeded through a structured analysis, applying statutory interpretation principles, factual chronology, and analogy to other authorities:

Mandatory nature of section 12AA(2): The Bench first examined the language of sub-section (2) — which states that every order granting or refusing registration "shall" be passed within six months from the end of the month in which the application was received — and compared it with other provisions in the Income-tax Act where the legislature clearly marked time-limits as directory (for example sections 250(6A) and 254(2A) by adding "where it is possible"). The Bench concluded that the statute intended a mandatory time-limit for the CIT to dispose of registration applications within six months.
Assessment of possible consequences of non-decision: The Bench examined the consequences urged by the assessee (deemed grant; deemed refusal; abatement; or continued pendency). It applied a process of elimination based on legal principle and practical consequence:
- Deemed refusal would be ineffective because refusal requires a written order with reasons and an appealable order; without a written order the appeal remedy would be illusory.
- Abatement or treating the application as pending would unjustly force the applicant to reapply or would permit indefinite extension of the CIT's power — outcomes that the statute does not contemplate and which would introduce uncertainty.
- By exclusion, the Bench found deemed grant to be the only consequence consistent with the statutory scheme and practical fairness, while also allowing the revenue protection mechanisms in the statute to operate subsequently.
Policy and administrative considerations: The Bench emphasized the need for obedience to statutory time-limits as part of good administration. It noted that allowing the CIT to pass orders at any time would create uncertainty, potentially frustrate legitimate claims for exemption, and could compel applicants to invoke constitutional remedies. The factual chronology in the present case (enquiries initiated late, long gaps in activity, and final order more than a year after the deadline) illustrated the mischief that the mandatory time-limit seeks to prevent.
Protection of the revenue and available remedies: The Bench accepted the assessee's point that even if registration is deemed granted, the CIT retains power to cancel registration under section 12AA(3) following enquiries; the cancellation itself is appealable to the Tribunal under section 253(1)(c). The Assessing Officer may also scrutinize the trust's activities during assessment proceedings. Thus, revenue interests are not left unprotected by a rule of deemed grant.
Reliance on analogy and precedent: The Bench found helpful analogy in DLF Universal Ltd. where the Supreme Court held that non-decision within a statutory period under section 269UD required issuance of a "no objection" certificate. It also accepted the reasoning of multiple Tribunal Benches (including Karnataka Golf Association) that had reached the same conclusion in similar circumstances. The Bench relied on Dalchand and the interpretative guidance from G.P. Singh (and Lord Shaw's dictum) to prefer an interpretation that avoids uncertainty and mischief.
Conclusion of reasoning: Combining the mandatory textual reading, the consequences analysis, the protective statutory mechanisms (section 12AA(3) and appeal rights), and analogous authorities, the Bench concluded that if the CIT does not pass an order within six months, the registration is to be deemed granted.

Holding and Implications

Holding: The Special Bench answered the referred question in the affirmative. Concretely, it held that where the CIT does not pass an order granting or refusing registration within the period laid down in section 12AA(2), registration is deemed to have been granted as applied for by the assessee. The Bench quashed the CIT's order refusing registration in the present case and allowed the appeal.

Implications:

The direct effect in this appeal is that the order of the CIT refusing registration (passed after the statutory six-month period) is a nullity and registration is deemed granted to the assessee.
The decision preserves statutory protections for the revenue: the CIT retains power under section 12AA(3) to cancel registration if enquiries (including those conducted after the six-month period) show the trust is not entitled to registration; any cancellation is appealable under section 253(1)(c) to the Tribunal.
The Bench observed broader administrative consequences as a rationale: interpreting the time-limit as mandatory prevents uncertainty and mischief caused by administrative delay. The Bench did not purport to decide the substantive merits of the trust's claim to registration — it expressly did not examine those merits in light of its deemed-grant conclusion.
The order aligns the Special Bench with earlier Tribunal decisions (cited in the opinion) and with the analogy drawn from DLF Universal Ltd.; the Bench's ruling settles the referred question in the affirmative for the purpose of this appeal and to guide similar future cases heard by the Tribunal.

Note: This summary is strictly confined to the content and reasoning contained within the provided opinion. No facts, arguments, or legal propositions have been added that were not present in the opinion text.

Show all summary ...

ORDER

Per R.V. Easwar, Vice President. - The appeal has been referred to the Special Bench and the following question has been posed for decision :

"Whether in a case where the Commissioner of Income-tax does not pass the order granting or refusing registration of Trust within the period laid down in section 12AA(2) registration would be deemed to have been granted to the Trust or Institution automatically on expiry of the period specified in section 12AA(2) of the Act?"

2. A few basic facts may be stated now. The assessee is a charitable institution. It applied to the CIT for registration under section 12A of the Income-tax Act on 23-10-2001. Under section 12AA(2) every order granting or refusing registration shall be passed by the CIT before the expiry of six months from the end of the month in which the application was received by him. In the case before us the CIT ought to have passed an order granting or refusing registration on or before 30-4-2002. He however passed the order refusing registration to the trust on 26-5-2003 which was beyond the period laid down in section 12AA(2). He had however initiated certain enquiries by letter dated 3-4-2002, which was well within the period of six months, to which the assessee responded by furnishing the relevant details. The enquiry continued well beyond 30-4-2002 and ultimately the CIT passed the order refusing to register the assessee-institution.

3. When the appeal of the assessee against the order of the CIT was originally taken up for hearing, the argument of the assessee was that once the time-limit fixed by section 12AA(2) expired without the CIT having passed any order, it must be deemed that the registration has been granted and in support of this contention, two orders of the Tribunal, one of the (Delhi) Bench in Sambandh Organisation v. CIT [IT Appeal No. 5582 (Delhi) of 2003] and another of the Bangalore Bench in Karnataka Golf Association v. DIT(E) [2005] 272 ITR 123 (AT), were relied upon. In these orders, it was held in the event the application for registration is not decided one way or the other within the period of six months, then the registration sought for must be deemed to have been allowed. The Bench was of the view that this would result in certain serious consequences and cited as an example the case of a trust having objects which are not charitable. It further opined that there is no specific provision in the section to the effect that registration would be deemed to have been allowed if no order is passed within the period of six months. However since a contrary view had been expressed by two co-ordinate Benches of the Tribunal, the Bench thought it fit and proper to place the appeal before the Hon'ble President for being referred to a Special Bench and also proposed the question to be decided (extracted in the first paragraph). The Hon'ble President has accordingly constituted the Special Bench.

4. Section 12AA was introduced by the Finance (No. 2) Act, 1996 with effect from 1-4-1997. The object of introducing the section, as stated in the Circular No. 762 of 18-2-1998, is as follows :

"19.1 Registration of charitable and religious trusts.—Under the existing provisions of the Income-tax Act, exemption from income-tax in respect of the income of a charitable or religious trust or institution is available only if the conditions specified in that section are satisfied. One of these conditions is that the person in receipt of the income shall make an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Chief Commissioner or the Commissioner of Income-tax Act for processing of such an application and granting or refusal of registration to the concerned trust or institution.

19.2 Hence the Finance (No. 2) Act, 1996, now provides for a procedure to be followed for grant of registration to a trust or institution. According to this procedure, the Chief Commissioner or Commissioner shall call for documents and information and conduct enquiries to satisfy about the genuineness of the trust or institution. After he is satisfied about the charitable or religious nature of the objects and genuineness of the activities of the trust or institution, he will pass an order granting registration. If he is not so satisfied, he will pass an order refusing registration. However, an opportunity of being heard shall have to be provided to the applicant before an order of refusal to grant registration is passed by the Chief Commissioner or the Commissioner. The reasons for refusal of registration shall also have to be mentioned in that order. The order granting or refusing registration has to be passed within six months from the end of the month in which the application for registration is received by the Chief Commissioner or the Commissioner and a copy of such order shall be sent to the applicant.

19.3 It has also been provided that the grant of registration shall be one of the conditions for grant of income-tax exemption.

19.4 These amendments shall take effect from the 1st day of April, 1997. [Sections 5 and 6]"

The argument of the learned counsel for the assessee before us is that (a) the right to obtain registration is a valuable or substantive right conferred upon the assessee and is the entry point for obtaining exemption of income under section 11 of the Act; (b) a right of appeal has been provided to the Tribunal against an order refusing registration with effect from 1-6-1999; (c) having regard to the object for which the section was introduced and the mandatory language used in sub-section (2) - "shall" - it is incumbent on the CIT to either refuse or grant registration within the time-limit of six months; (d) that if he does not pass any order within the said time-limit and passes the same after the time-limit, such an order is a nullity and can be ignored. According to the learned counsel for the assessee, any of the four consequences flow if no order is passed by the CIT within six months period and they are :—(i) registration is deemed to be granted; (ii) registration is deemed to be refused; (iii) the application for registration would abate; and (iv) the application would be treated as pending. In the submission of the learned counsel, consequence Nos. (ii) to (iv) are ruled out. He says that registration cannot be deemed to be refused because a refusal of registration has to be supported by reasons in a written order which is appealable to the Tribunal under section 253(1)(c) and no appeal can be filed if there is no written order. He further says that the application cannot be deemed to abate in the absence of a specific provision saying so. Further, the application cannot abate for the fault of the CIT in not passing the order within the time provided. As regards consequence No. (iv), the learned counsel says that if the application is deemed to be pending and is required to be disposed of on that footing, the period of limitation for passing the order gets extended for which there is no power vested in any authority. He, therefore, commends for acceptance the consequence that the application must be deemed to be allowed.

5. Two reasons are given by Dr. Gupta, the learned counsel for the assessee, as to why the application for registration must be deemed to be accepted. The first is that there is no inconvenience caused to the department, because it would still be open to the CIT to invoke sub-section (3) of section 12AA to cancel the registration deemed to have been allowed and the assessee would not be prejudiced because of the cancellation as it would get a right to appeal against the cancellation of registration to the Tribunal in terms of section 253(1)(c). Secondly, even if no order is passed by the CIT cancelling the registration, it would be open to the Assessing Officer to examine the charitable nature of the activities actually carried on by the assessee while examining the return in the course of the assessment proceedings and he is also empowered to verify the application of the monies of the trust for charitable object, investment of the funds etc. and thus no prejudice would be caused to the revenue because of the deemed registration. Dr. Gupta thus says that if registration is deemed to be allowed no prejudice would be caused to the revenue and at the same time the assessee's rights or interests are also protected. 6. In support of the above arguments, Dr. Gupta relied on the view expressed in Chaturvedi & Pithisaria's Commentary on Income-tax, 5th edition, Vol. 1, page 1090, under the head "Time-limit prescribed for passing order granting or refusing registration". The authors have expressed the view that if no order is passed within the six months period a presumption would arise that registration has been granted. The view expressed by Dr. Avadesh Oza in his Commentary on Income-tax Law, Vol. 1, 2nd edition (2003) at page 1301 to the same effect is also relied upon.

7. In addition, Dr. Gupta drew our attention to analogous situations arising under section 139, under which it has been held that if the application for extension of time to file the return has not been disposed of and no order refusing the time is intimated to the assessee it must be deemed that the extension of time as applied for has been allowed : Lachman Chaturbhuj Java v. R.G. Nitsure [1981] 132 ITR 631 (Bom.) , Harmanjit Trust v. Commissioner Of Income-Tax, Patiala-I. [1984] 148 ITR 214 (Punj. & Har.), CIT v. Surinder Kumar Parmod Kumar [1992] 193 ITR 71 (Punj. & Har.) , Commissioner Of Income-Tax v. Rohit Organics (P.) Ltd. [2006] 150 Taxman 254 (All.) and Commissioner Of Income Tax, Jullundur v. Ajanta Electricals, Punjab. [1995] 215 ITR 114 (SC) . Reference was also made to section 269UD(1) under Chapter XX-C which gives a time-frame of two months to the appropriate authority to pass an order of pre-emptive purchase of the property and it was pointed out that the Supreme Court in DLF Universal Ltd. v. Appropriate Authority [2000] 243 ITR 730 has held that if no order is passed within two months it will be deemed that the appropriate authority is not intending to purchase the property and it is duty-bound to issue a "no objection" certificate.

8. Dr. Gupta contrasted the language employed in sections 12AA, 153B and 158BE on the one hand, which is positive, with the negative language used in section 153 etc. and contended that in substance there is no difference in the consequence of the failure to pass the order by the specified date. He would submit that the effect of the expressions such as "the order shall be passed within a period of...." and "no order shall be passed after a period of......" is the same. He also contrasted the above sections with the language used in sections 250(6A) and 254(2A), under which the CIT(A) and the Income-tax Appellate Tribunal, respectively, have been directed to dispose of the appeals within a particular time-frame "where it is possible". He submitted that whereas the language employed in the first set of sections is mandatory and has to be strictly adhered to, the language employed in the second set of sections is merely directory and merely because the CIT(A) or the Tribunal has not found it possible to dispose of an appeal within the set time-limit it will not be deemed that the appeal is allowed. Where the language is mandatory, according to Dr. Gupta, the result would be that the failure to pass an order within the period provided would result in the position that the application or return would be deemed to have been accepted.

9. Our attention was drawn by Dr. Gupta to pages 145 and 382 of G.P. Singh's "Interpretation of Statutes" (2006 edition) as to the effect of a friction or uncertainty in the Statute. It may be recalled that he had earlier submitted that section 12AA did not provide for a situation where no order was passed by the CIT within 6 months from the end of the month in which the application for registration was filed. The consequence, according to him, was thus uncertain. In such a situation, he contends that the dictum of Lord Shaw in Shannon Realities Ltd. v. St. Michel (Ville De) [1924] AC 185 (PC) should be followed, which is to the effect that "where alternative constructions are equally open that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating ; and that alternative is to be rejected which will introduce uncertainty, friction or confusion into the working of the system". Strong reliance was placed on the author's commentary under the head "Considerations of general inconvenience in statutes imposing public duty; provisions as to time; provisions for consultation" at page 381 of the treatise particularly the following observations at page 382: "If performance of a public duty is required to be done within a specified time, which is also related to a right given to a person, the provision as to time will still be held as directory unless it is shown that the person on whom the related right is conferred is prejudiced because of the non-performance of the duty within the specified time" and the observations at page 383 to the effect that "if the statutory provision as to time is a condition for exercise of a statutory power as distinguished from a duty, the prescription as to time will be construed as mandatory" (Supdt. of Taxes v. Onkarmal National Trust AIR 1975 SC 2065, CCE v. M.M. Rubber & Co. AIR 1991 SC 2141. Dr. Gupta also roped in the doctrine of legitimate expectation, under which a citizen has a right to expect that on compliance with the conditions of the statute his application would be accepted.

10. The learned senior departmental representative on the other hand submitted that the word "shall" in sub-section (2) of section 12AA has to be read as "may", that despite the use of the word "shall" it was open to the CIT to pass orders even after the 6 months period as he was only exercising a power to allow or grant registration, that the time-limit prescribed by the statute is only directory, that in the present case the CIT has initiated the enquiry before the expiry of the time-limit and it was only because the enquiry continued for a long time that the order could not be passed before 30-4-2002 and that so long as the assessee's rights are not prejudiced and a right of appeal against the refusal to register the trust or institution is available to it, no grievance can be made out of the fact that the refusal order was passed after the period of limitation prescribed in the sub-section.

11. We think that there is a good deal of force in the arguments of Dr. Gupta. The question whether the CIT should pass an order within 6 months from the end of the month in which the application for registration is filed does not present much difficulty. In our opinion, he has no option but to obey the mandate of the law, as we all must. Unless the statute provides for exceptions, the order must be passed by statutory authorities in accordance with the time-limit set by the law. The sub-section (2) of section 12AA does not admit of any exception to the rule. Wherever the time-limit for passing an order was meant only to be directory, the Income-tax Act has taken care of the same by providing, for instance, in section 250(6A) and section 254(2A) that the CIT(A) and the Tribunal shall dispose of the appeals "where it is possible" within a particular time-frame. We therefore do not have any doubt that it is mandatory for the CIT to dispose of the application for registration within six months from the end of the month in which the application was filed.

12. The other question presents some difficulty. That question is about the consequence of the failure of the CIT, for whatever reason, to pass the order within the period prescribed. Dr. Gupta, it may be recalled, had argued that the only consequence would be that registration will be deemed to have been granted. After a good deal of deliberation upon the argument, we are inclined to think that it would be so. If the application for registration is to abate because the CIT did not pass an order thereon and the assessee is asked to file another application again, that would be putting the assessee to the grind all over again for no fault of his. That consequence should be avoided. If the application is to be treated as pending, then again the CIT would be getting an extended period of limitation which the section does not allow. Further, it would be uncertain as to how long the period can be extended. The assessee cannot be kept waiting to the end of time. If we hold that the application must be deemed to have been refused, obviously the assessee must be in a position to file an appeal against the refusal to the Tribunal but it will not be able to do so in the absence of a written order containing the reasons for refusal; the appeal remedy would be rendered illusory. That consequence cannot be countenanced. Therefore, by a process of exclusion, we are inclined to accept the conclusion that the CIT must be deemed to have allowed the registration if he has not passed any order within the time prescribed. That way, the rights of the department are also protected in the sense that it would be open to the CIT to cancel the deemed registration by invoking sub-section (3) to section 12AA, if it is otherwise permitted and the procedure prescribed therefor is followed. The assessee, if aggrieved by the cancellation of registration, has a right to appeal to the Tribunal under section 253(1)(c).

13. It must be remembered that the object of introducing section 12AA was to provide for the processing of the application for registration, registration being a condition for obtaining exemption of the income of the trust or charitable institution under section 11 (see the circular cited supra). It would be incongruous to hold that while the condition that the trust or charitable institution must be registered with the CIT is mandatory or absolute, the provision that the CIT shall pass an order thereon within six months from the end of the month in which the application was filed is merely directory, leaving it to the convenience of the CIT to pass the order at any time he likes disregarding the time-limit prescribed. That would introduce an element of uncertainty and confusion in the administration of the Act and may even compel trusts or institutions claiming exemption under section 11 to invoke Article 226 of the Constitution. Such consequences have to be avoided. The assessments of the trust or charitable institution may in the meantime be completed rejecting the claim for exemption on the ground that it is not registered, even though the trust/charitable institution is found by the Assessing Officer to satisfy the other conditions such as application of income, investment of the funds and so on. In other words, by not passing the order within the time-limit, the claim of the trust/charitable institution can be frustrated, albeit unintentionally. There is no good ground shown before us, nor does any appear to exist in the scheme of the Act, to hold that the time-limit within which the CIT has to pass an order on the application for registration of the trust or institution is merely directory.

14. It is not merely a question of prejudice being caused to the assessee, but it is something which in our opinion goes to the very root of good administration and obedience to the law. If you talk of prejudice to the assessee, may be in the present case it could be argued that there is none, as the assessee has the right to file an appeal to the Tribunal and in fact had done so and thus has an opportunity to correct the perceived injustice. But the more fundamental question, with respect, is whether the CIT should take the time-limit lightly and whether he could not have conducted and completed his enquiry and passed an order - whether granting or refusing registration - when a sufficiently large time-frame is given by the section (six months from the end of the month in which the application is filed) to facilitate whatever enquiry the CIT wants to conduct to verify the genuineness of the trust, its objects, its activities etc. In the case on hand, he has started the enquiry as late as 3-4-2002 when the time-limit for passing the order would come to an end on 30-4-2002. The assessee has not been found wanting in diligence or in promptly replying to the queries made. Its first reply was on 12-4-2002. There was a further query only on 3-5-2002 which was also promptly replied. But by that time the last date for passing the order had expired. For 18 days in April (between 12th and 30th) there seems to have been no progress in the enquiry. Thereafter, a final show-cause notice was issued on 31-7-2002 to which the assessee replied on 8-8-2002. Another notice was issued on 9-9-2002 asking for details of the donations received, which were filed on 23-9-2002. The order refusing registration was ultimately passed on 26th May, 2003, more than a year after the expiry of the time-limit. The entire chronology shows that no action was taken on the application till the time-limit for passing the order was about to come to an end. When the enquiry was started at a very late stage, it was found that there were many things to be enquired into and so the enquiry could not be completed and an order passed on or before 30-4-2002. The time-limit prescribed was given a go-by, the enquiry was continued and finally an order was passed refusing the registration.

15. We are highlighting the above facts only to show that it could not have been the intention of the law that the CIT could pass the order granting or refusing registration at any time. Any provision has to be so interpreted as to advance the cause and suppress the mischief. The interpretation suggested by Dr. Gupta, in our humble opinion, would conform to this rule. In Dalchand v. Municipal Corpn. AIR 1983 SC 303 it was observed that "there are no ready or invariable formulae to determine whether a provision is mandatory or directory. The broad purpose of the statute is important. The object of the particular provision must be considered. The link between the two is most important. The weighing of the consequence of holding a provision to be mandatory or directory is vital and, more often than not, determinative of the very question whether the provision is mandatory or directory........ the negligence of those to whom public duties are entrusted cannot by statutory interpretation be allowed to promote public mischief and cause public inconvenience and defeat the main object of the statute....". Applying these observations to the question posed before us, it appears to us that the interpretation which Dr. Gupta wants us to place on sub-section (2) of section 12AA is the better one.

16. It is well to remember that the CIT is exercising a power vested in him under the Act which will decide, subject to appeal, the fate of the claim of the trust or institution for exemption under section 11. It is an important power. Sufficient time has been given to him to conduct all enquiries into the claim for registration. The section itself was introduced to provide for the procedure for registration which had not been provided earlier. The only condition before the introduction of the section was that an application for registration should be made to the CIT (section 12A). Section 12AA was introduced to provide for the procedure for registration, enquiry into the claim and a time-limit for passing the order. All these form a compendious whole and we do not see why, while exercising such an important power the CIT should also not pass an order within the time-limit provided. It will be incongruous to hold that conducting an enquiry into the claim for registration is an important exercise of the power whereas passing of the order within the time-limit provided is not and it can be done at any time. Further, the principle that an authority (the CIT) cannot be allowed to take advantage of a breach of duty (not passing the order within the time-limit) on his part and claim that grant of registration is no longer possible as the prescribed period of six months from the end of the month in which the application for registration was filed is over, would apply to the interpretation of the sub-section.

17. The consequence of a decision that if the CIT has not passed the order within the period of six months from the end of the month in which the application for registration was filed then registration would be deemed to have been granted may now be seen. We have already referred to sub-section (3) of section 12AA which gives power to the CIT to cancel the registration and he can invoke the same if enquiries completed by him beyond the time-limit reveal that the trust/charitable institution is not entitled to registration. The assessee would get a right of appeal to the Tribunal against the same. The matter would be thrashed out before the Tribunal. Apprehensions were expressed before us on behalf of the department that even a trust whose objects were not charitable would get registration by such deeming. The apprehension is not fully justified, because there is nothing in law to prevent the CIT from making his own enquiries even after the expiry of the time-limit and making use of the results thereof to cancel the registration under sub-section (3). The consequence would outweigh the uncertainty or confusion which the non-passing of the order within the time-limit would introduce into the working of the system. Lord Shaw's dictum which we have quoted earlier would cover the case.

18. Among the several authorities cited on behalf of the assessee, we find that DLF Universal Ltd.'s case (supra), helps the assessee the most. In that case the provisions of section 269UD of the Act, appearing in Chapter XXC of the Act, providing for pre-emptive purchase of a property by the Government came up for consideration. A statement in Form No. 37-I was filed before the appropriate authority. It was found to be in order. It was filed within the time prescribed. Under the section the appropriate authority had to pass an order within three months from the receipt of the statement purchasing the property or to give a "no objection" certificate. The petitioner before the Court had complied with all the conditions imposed on it. But the appropriate authority did not pass any order within the period of three months mentioned above for purchase of the property by the Central Government. The Supreme Court held that in these circumstances "the appropriate authority is duty bound to issue no objection certificate to the transfer of the property". The only difference, without any substantial distinction, is that while the time-limit of three months was prescribed in the first and second provisos to section 269UD, the time-limit of 6 months from the month in which the application for registration was filed is prescribed in the sub-section (2) itself of section 12AA. Another difference, again without any distinction, is that the provisos to section 269UD are couched in negative language ("no such order shall be passed... after the expiration of....") while sub-section (2) of section 12AA is couched in positive language ("every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of...."). The effect or the result is in our opinion the same, viz., the orders have to be passed within the time-limit prescribed and if not the application should be deemed to have been granted.

19. In the ultimate analysis, it seems to us that we must agree with the conclusion which the Bangalore Bench reached in Karnataka Golf Association v. Director of Income-tax [2004] 91 ITD 1 , the Delhi Bench in Sardari Lal Oberoi Memorial Charitable Trust v. ITO [2005] 3 SOT 229 and Chennai Bench in People Education & Economic Development Society (PEEDS) v. ITO [2006] 100 ITD 87 (TM) . We accordingly answer the question referred to us in the affirmative. The order of the CIT refusing registration is a nullity and is quashed. Registration is deemed to have been granted as applied for by the assessee. The appeal is allowed. In the light of this, we do not propose to examine the merits of the claim for registration.